Contractor's woes may hit projects

PHOTO: Contractor's woes may hit projects

Several hundred million dollars worth of projects could be delayed after soaring costs forced Poh Lian Construction to seek breathing space from creditors.

The long-established player whose office is near Paya Lebar was granted an interim judicial management order last week.

This is a temporary court-supervised rescue plan that will give the firm more time to sort out its affairs.

Mr Tam Chee Chong and Mr Andrew Grimmett from accounting firm Deloitte & Touche have been appointed the interim judicial managers.

Poh Lian, which is a unit of Singapore-listed United Fiber System (UFS), highlighted the headwinds it was facing when the parent released its financials for the year ended Dec 31.

It pointed to significant cost overruns due to delays in some projects, extensive use of increasingly pricey foreign labour by subcontractors and higher wage costs due to changes in labour policy. Poh Lian's revenue for the year was $235 million.

Poh Lian's website shows that it is the main contractor for several local developments. Based on earlier announcements, the contract values are estimated at several hundred millions.

Among them are H2O Residence being developed by City Developments (CDL), GuocoLand projects Sophia Residence and Goodwood Residence, and two Housing Board Build-to-Order (BTO) projects in Bukit Panjang.

A CDL spokesman said on Tuesday: "CDL is unlikely to be adversely affected... We are taking prompt action and are already finalising the appointment of one of the reputable contractors, which will be able to take over and complete the construction of H2O Residences should the need arise."

CDL added that the project is about 20 per cent complete and should be ready on schedule in the second quarter of 2015. About 85 per cent of the units are sold.

GuocoLand said it is working closely with consultants and considering various options to resume work on its Sophia Residence and Goodwood Residence sites as soon as possible.

"(We) are currently in talks with several main contractors and will reserve all rights against Poh Lian," a spokesman said.

The Housing Board said it is working with Poh Lian and the judicial managers on arrangements to ensure that construction on the BTO projects Senja Grove and Senja Gateway can be completed with minimal delay. "Flat buyers will be informed should there be any delay to the completion timeframe that was earlier communicated to them."

Poh Lian's parent firm UFS requested a trading halt a day after the construction firm applied for its interim judicial management last week. Trading has yet to resume.

UFS has recorded pre-tax losses for three consecutive years. Construction and property make up over 95 per cent of its revenue.

Acting UFS chief executive Pauline Lee could not be contacted despite repeated calls to the office.

Late Tuesday night, the company confirmed that it had applied for judicial management.

Poh Lian's troubles could be an isolated case in the industry although Mr Colin Tan, head of research and consultancy at Chesterton Suntec International, noted that with costs rising, it will be crucial to see how firms draw up their contracts to address this issue.